Netflix has revolutionized the way of consuming entertainment around the world in the recent past. The movement has disrupted the complexity of Hollywood, established decades ago and thought to be untouchable.
The streaming service has become the new way to watch movies, series and cartoons. For consumers, costs have been drastically reduced when compared to movie tickets, video rentals and cable TV.
However, this evolution has been happening more and more quickly. Thus, the increase in competitiveness and alternative technologies that emerged from the success of Netflix led to negative results for the company last year, which is now thinking about new business models.
The recent drop
After the meteoric rise of Netflix as the first streaming service to dominate the world and generate millions for the company, it was in the fall of 2020 that a movement of stagnation and decline in results began.
At the time, the company took measures to contain the slowdown and began to think about strategies to increase profits.
However, it was in May of this year that the negative results were actually revealed to the world in their entirety. After announcing the constant and abrupt loss of subscriptions, Netflix laid off hundreds of employees, demonstrating a certain fragility in the face of negative results.
That situation sent stocks plummeting as much as 70% in May of this year, and now Netflix is preparing to announce the loss of more than 2 million subscriptions.
There are two main causes, exacerbated by Russia’s war against Ukraine in 2022. First, after the resounding success of Netflix, other entertainment companies and even other industries, such as Amazon, launched their own streaming services, allowing users to migrate platforms.
Another cause was that this same movement made many contents available for free on the Internet. This massively decreased the number of users who wanted to continue paying for the services.
Reducing subscription fees and including advertisements on the platform are two measures considered to minimize losses. Netflix has already taken a stand against the availability of advertising spaces on its platform in the past.
The new model
Faced with the difficulty of keeping expanding, mainly due to the emergence of new streaming services and the availability of free content, Netflix is currently looking for new business models.
The first two measures to be applied are service cost reductions and the possibility of including advertising within the platform. But not only that.
The platform that revolutionized the way of consuming image content, now returns to the origins of film studios like Disney, and plans to create a franchise model of its creations.
The idea is to be able to break down ideas and footage into products that can be marketed in different ways. In recent successful cases, this strategy was used in the children’s series “Stranger Things”. The theme has been used for numerous products such as clothing and accessories in department stores all over the world.
Additionally, a spin-off series and a stage play are in the works. The brutal success of the science fiction theme made the company look to this as a model of the studios’ potential.
The recent crash caused Netflix in October 2020 to hire the new global head of TV Bela Bajaria. Bajaria is a former executive at Universal Television and one of the great strategies of the studios is to extend the franchise model.
The productions aimed at achieving this objective are series of fantasy themes, with great potential for shows and spectacles.
The idea is to charge royalties for the use of production names, and perpetuate profits with products, theme parks and any other attractions and interactivity that bear the brand name. The strategy is very similar to what Disney has done in countless animations and films in the last century, as well as the resounding success of Star Wars.